Wednesday, December 31, 2014

India FDI Out Flows Report

Abstract

One
of the noteworthy dimensions of India’s increasing integration with the world
economy has been the increase in both gross Foreign Direct Investment (FDI)
inflows to and outflows from the country over the last decade. India has emerged as the
world's 21st largest outward investor, with an investment of over USD 75
billion across the world over the past decade. Annual FDI outflows have jumped
fifty-fold after 2000, and Indian firms have invested over USD 75 billion overseas
in the past decade, in some cases to attain global status by acquiring
world-leading firms. Indian firms now invest across a wide variety of sectors
and countries, departing from their historical focus on trading and textile
investments in developing countries.Following the 25 per cent crisis-induced drop in Indian
OFDI in 2009, Indian firms are once again increasing their overseas investment,
including through mergers and acquisitions (M&As) Investments by domestic companies abroad
dipped by over 36 per cent to about USD 10.3 billion during 2009-10 compared
the previous fiscal, with a large chunk of it going into the manufacturing
sector.

Introduction

The first overseas Indian venture was a textile
mill set up in Ethiopia in 1959 by the Birla Group of companies, India’s second
largest business conglomerate at the time (Kudaisya 2003). The following year,
the Birla Group set up an engineering unit in Kenya. Sustained growth in Indian
overseas investment could be seen starting around the late 1970s when the
industrial licensing system became much more stringent as part of the
government’s move to control big businesses. By 1983, there were 140 foreign
investment projects in operation and another 88 in various stages of
implementation (Lall 1986). The total number of approved projects had reached
229 by 1990 (Kumar 2007). Most of the foreign affiliates set up during this
period were small- or medium-scale ventures; total approved equity during the
period 1975–1990/1991 amounted to only $220 million. The second wave of
internationalization of Indian firms began from about 1995 and gathered
momentum as foreign exchange restrictions on capital transfers for overseas
acquisitions liberalized in successive stages from 2000 (nagaraj 2006). There
was a surge in outward investment from 2005. The number of approved projects
increased from 220 in 1990/1991 to 395 in 1999/2000 and to 1,595 in 2007/2008
(kumar 2008). total FDI outflow from India increased from about $25 million in
the early 1990s to nearly $14 billion in 2007. India’s share in total
developing economy FDI outflows remained below 0.5 percent throughout the
1990s, but increased continuously since, reaching nearly 6.0% in 2007. India
remains a net FDI recipient, even though the gap between outflows and inflows
has been sharply narrowing over the past few years. In 1990, annual outflows,
on average, amounted to 7 percent of inflows. This increased from about 30
percent to 60 percent between 2000–2005 and 2005-2007.

A majority of India's outbound FDI flows has been as a consequence of a quest for raw materials since India is a raw material scarce country. For example, Tata Steel has been active to secure coal assets in Indonesia with superior grade coal due
to lack of high quality coal in
the country coupled with a highly
regulated industry where
private players are not allowed. A
lot of India's FDI outflows in recent
times have been in acquisitions in the
IT and IT services sectors.Indian enterprises
have developed expertise and capabilities
in IT services which they want to leverage and enter global markets.This
is because
of opportunities to acquire newer clients at lower costs as a consequence
of a booming local stock market and low P/Es in economies abroad. For example HCL Technologies completed
the acquisition of Axon
for 440 million pounds.
India's FDI flows in recent times has been
to acquire crude oil assets in
a bid to secure the energy needs
of the country through ONGC Videsh Ltd., a partnership between ONGC and Mittal Steel.

Manufacturing has seen a consistent growth over the last five years. This has especially
been driven by sectors such as automotive components and machine
tools which are export oriented and
acquire firms for access to technology
and clients, especially
in markets such as Europe where client contracts are long term and it is otherwise difficult to get access. The Non financial services and Trading sectors have seen wide fluctuations in outward
flows.

You can Download this 07 page Complete Project Report title India FDA out
Flows (Complete Analysis) for FREE from the
Below Link.